The Spanish midfielder joined the Merseyside club from Sevilla in 2013 for a fee in the region £6.8m ($10.7m) but failed to impose himself at Anfield during his debut campaign making just two starts and 10 substitute appearances.
Brendan Rodgers is unlikely to retain the midfielder's services, after he struggled in the first season with the Reds, while also failing to make an impact on-loan with the Spanish club during the 2014/15 campaign.
He started brightly in Spain scoring the only goal in a victory over Athletic Bilbao on the opening day of the La Liga season, but gradually faded away and made just nine starts in all competitions during the entire campaign.
Malaga boss Javi Garcia praised the young Spaniard as recently as March regarding his talent and ability to score goals, but admitted that his lack of playing time was the result of better performances from other players in the his position.
"He has a technical level that sets him apart from other players," Garcia is quoted as saying by the Liverpool Echo.
"He is talented, finishes well and scores goals. It is true that he is playing less than he might like because others are playing well, but he has a promising future."
"I have no doubt that he is a very good player but he still needs to consolidate himself," the La Liga side's manager added.
The report claims that the 22-year-old midfielder will again be put up for loan, unless the Reds manage to offload him on a permanent basis during the summer transfer window.